Self-employed pension saving dips to record low

Self-employed pension saving dips to record low

10/08/2021 - 08:52

Self-employed pension savings hit a record low in the year leading up the pandemic, according to figures released by HMRC.

Whether it’s through an umbrella company like, as a sole trader or through a limited company, more people are choosing to work for themselves. But the amount that self-employed workers pay into their pension pots is on the decline.

In 2019/20, self-employed people paid £830m into their personal pensions. This was down from £1.15bn in the previous year and is the lowest amount on record.

To make matters worse, experts predict that the coronavirus pandemic will have further reduced self-employed pension savings in the year to April 2021.

HMRC figures show that personal pension contributions by the self-employed has declined in recent years.

In 2001/02 self-employed people contributed £2.5 billion. Pension savings peaked in 2007/08 at £3.5 billion and since 2012/13, self-employed savings haven’t risen above £2 billion.

And this is all despite a growing number of people choosing to go self-employed in recent years. In the final quarter of 2019, there were more than 5 million self-employed people in the UK - up from 3.2 million in 2000.

Since auto-enrolment legislation was introduced in 2012, all employers must offer employees a workplace pension scheme. In many cases, employers also add money to employee pension schemes.

If you decide to work through an umbrella company then you are considered an employee for tax purposes and you will be offered the opportunity to join a pension scheme when you start. However, if you are a sole trader or work through a limited company then it will be up to you to save for retirement.

This has led to a growing disparity between employee pension saving and self-employed pension saving. Recent figures from the Institute for Fiscal Studies suggest that just one in five of the UK’s self-employed population were saving into a pension.

For more information about umbrella company pensions or self-employment, speak to a member of the team today. Call: 0800 121 6513.